Obama Goes Nuclear, In a Good Way

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What a difference a year can make. On Tuesday President Obama announced that the Department of Energy would guarantee $8.3 billion of loans to Southern Company, enabling its subsidiary, Georgia Power, to build two nuclear power plants, the first in America in over 30 years.

Going well beyond that and opening a new chapter in his approach to energy and climate, Mr. Obama promised up to $36 billion in federal loan guarantees for nuclear facilities and declared, "we're going to have to build a new generation of safe, clean nuclear power plants in America. "

Yet only a year ago, Mr. Obama's 2010 Budget contained no mention of nuclear power. Nor did the 1,400-page American Clean Energy and Security Act of 2009 - cost: $820 billion over the next decade - sponsored by liberal Democrats Henry Waxman and Ed Markey, which passed the House last June.

Why the change of heart? Here's a clue:

Mr. Obama made his announcement at the International Brotherhood of Electrical Workers Local 26 job training center in Lanham, Maryland. He was joined by Building Trades President Mark H. Ayers; United Association of Plumbers and Pipefitters President William P. Hite; and President Ed Hill of the IBEW. He boasted that the plants would create thousands of "well-paying" construction jobs, and 800 permanent jobs after the construction was finished.

For "well-paying," read "union jobs." With over 14 million Americans unemployed, and an unemployment rate of 9.7%, organized labor, one of Mr. Obama's most important constituencies, is getting restive. Furthermore, Congress has yet to pass the Employee Free Choice Act, top on unions' wish list. The election of Massachusetts Senator Scott Brown, a Republican, to the seat of former Democratic Senator Edward Kennedy has made it even less likely that the union-favored bill will make it into law.

The International Brotherhood of Electrical Workers and the Plumbers and Pipefitters, whose presidents joined Mr. Obama on Tuesday, are desperate to get more work and members, because the Labor Department lists their pension plans as in "critical" status - meaning that they have less than 65% of assets needed to fulfill their obligations to current and future retirees. The Building Trades United Pension Fund has postponed bringing its funds into actuarial balance due to financial difficulties.

Hence, Mr. Obama is turning his attention not to creating just any job, but to creating jobs for union members. Making a virtue of necessity, he is taking energy policy in a direction that unions, centrists, and conservatives have advocated, for good reasons, and one that some environmentalist allies of the Democratic Party have resisted. What used to be a coalition between blue-collar union workers and green environmentalists is splitting, with the greens losing ground.

Wind turbines and solar panels, although pleasing to Mr. Obama's green environmental base, are produced increasingly abroad, and particularly in China, so mandating their use creates more jobs offshore. But building nuclear plants will be union jobs here at home.

Any projects built with federal funding have to pay prevailing wage rates pursuant to the Davis-Bacon Act, and those rates are approximately 20% above standard wage levels. Hence the union applause at the president's announcement.

Turning to another facet of energy policy that the greens oppose, Mr. Obama even said that "we're going to have to make some tough decisions about opening up new offshore areas for oil and gas development," implying that the country can expect an announcement along those lines soon. Domestic oil and gas development are another sector of well-paying jobs for blue collar workers that cannot be outsourced to Canada, Mexico, or China.

Whatever the reason, all of us should be grateful that Mr. Obama is supporting nuclear power, a less-expensive means of reducing greenhouse gas emissions and one that already provides 20% of America 's electricity.

A while back, New Hampshire Republican Senator Judd Gregg told me that America should build 100 nuclear power plants by 2030, a proposal endorsed by the Senate Republican Conference. "This will clean up the air," he said, "and reduce reliance on foreign oil. This is a much more constructive approach than the climate change bill."

One hundred nuclear power plants is about twice what America needs, but Senator Gregg can be forgiven for his enthusiasm.

Ideally the government should not have to support nuclear power with federal loan guarantees. Nuclear power is relatively inexpensive to generate once a plant is built, but construction of these plants entails a substantial up-front capital cost, possibly $8 billion each. Generating private investment is difficult due to the possibility of lawsuits and regulatory delays. Instead of providing loan guarantees, Mr. Obama could have aided the nuclear power industry through protection from lawsuits.

The safety issue most familiar to Americans, disposal of spent uranium fuel rods, has generated headlines as Congress has argued about where in the country to store the waste. On Tuesday a panel of judges halted most license hearings for Yucca Mountain, the Nevada location currently designated as the nuclear waste site. After having invested billions of dollars and decades in Yucca Mountain, the Department of Energy is poised to abandon the project with no alternative in sight.

In his first year in office President Obama has presided over an administration that has been more hostile to the development of nuclear energy than any of his predecessors. This week, forced by economic realities, he has begun to resurrect the nuclear energy program he and his environmental supporters have long demonized. These are but initial steps - more are needed.


Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is senior fellow and director of Economics21 at the Manhattan Institute. Follow her on Twitter: @FurchtgottRoth.   

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